Black's Property Blog

Adrian Black delivers critical property market insights and the influences, behaviour and money driving them.

Comments on FT article on ways to cool the property market

by Adrian Black, Thursday 11 September 2014

Good article in FT on ways to cool the property market - that said I don't think we should be cooling it but we should be making it bigger, also I think an important aspect was missed.  For the financiers amongst us we all understand capital adequacy - one great way of managing lending is to change weights on risk assets and hence the capital required to support them.

Some other comments on the likelihood of ideas coming into effect:

1. Build more social housing

very unlikely this will happen - needs money.

2. Raise interest rates

will happen at some point very gradually - but the government needs to borrow and by running the deficit it is will want to keep interest rates as low as possible for as long as possible.

3. Reform the rental market

great idea - longer term tenancies please to give the security tenants require (especially as transaction taxes on buying are so high - these are real economic activity inhibitors).

4. Liberalise the planning process

this is the obvious thing to do, there must be massive vested interests stopping it - we only need a tiny amount of land to solve the crisis - let's call on all (well a few) politicians to be braver.  In 2012 Nick Boles the then planning minister commented in the UK and England at the moment we've got about 9% of land developed.  All we need to do is build on another 2-3% of land and we'll have solved a housing problem - why oh why has the government not progressed this?  At the very least they should have raised the priority on the debate. 

 

 5. Boost build to let

yes - but needs interest rates to remain low.

6. Reform property taxation

inevitable as the government is borrowing so much money - but why are transaction taxes so high?  Surely economics is about flow - the greater the flow the greater the activity and largely the more prosperous - transaction taxes inhibit flow and economic activity.

 

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